Forecasting low‐frequency macroeconomic events with high‐frequency data

Ana Beatriz Galvão and Michael Owyang

Journal of Applied Econometrics, 2022, vol. 37, issue 7, 1314-1333

Abstract: High‐frequency financial and economic indicators are usually time‐aggregated before computing forecasts of macroeconomic events, such as recessions. We propose a mixed‐frequency alternative that delivers high‐frequency probability forecasts (including their confidence bands) for low‐frequency events. The new approach is compared with single‐frequency alternatives using loss functions for rare‐event forecasting. We find (i) the weekly‐sampled term spread improves over the monthly‐sampled to predict NBER recessions, (ii) the predictive content of financial variables is supplementary to economic activity for forecasts of vulnerability events, and (iii) a weekly activity index can date the 2020 business cycle peak in real‐time using a mixed‐frequency filtering.

Date: 2022
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https://doi.org/10.1002/jae.2931

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Working Paper: Forecasting Low Frequency Macroeconomic Events with High Frequency Data (2022)
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